Traveling Abroad? How to Avoid Hidden Credit Card and ATM Fees
Thursday, May 20th, 2010
International travel is already expensive: pricey airfares; costly hotels; rental cars, rail passes, and taxis; and exchange rates that continually bounce up and down. When you’re traveling, you don’t need the added shock of coming home after a long trip only to see hundreds of dollars worth of fees on your credit card and bank statements.
But that’s just the type of thing that can happen to Americans who use credit cards and make ATM withdrawals when traveling abroad. Banks and credit card issuers often charge currency-conversion fees of up to 3 percent for each transaction, and banks can charge steep fees for ATM withdrawals in foreign countries.
2-for-1 Transaction Fees on Credit Cards and ATM Cards
Credit cards typically incur two per-transaction fees in foreign countries. The first is a 1-percent transaction fee that card issuers like Visa and MasterCard charge to convert foreign currency to U.S. dollars. The second, a completely arbitrary usage fee charged by some banks that issue credit cards, can be up to 2 percent of each transaction.
“They’re charging an extra 2 percent for absolutely no reason whatever, just because they believe they can,” said Gary Steiger, who runs the website Free Frequent Flyer Miles, which tracks and analyzes programs and offers from banks and credit card issuers.
ATM cards also typically incur two fees: a withdrawal fee as high as $5, plus an international transaction fee commonly ranging anywhere from 1 to 3 percent or $10, whichever is greater.
Travelers Have Options When It Comes to Paying Fees
Although fees from using credit cards and ATMs abroad can be steep, it’s possible to decrease or, in some cases, even eliminate them.
Travelers can avoid a credit card’s arbitrary 2-percent usage fee if you plan ahead and get a fee-free card prior to going on vacation. Some of these fee-free cards go even further and don’t charge the 1-percent transaction fee for currency conversions.
You can also minimize or even eliminate fees from ATM withdrawals by using an ATM card from certain U.S. banks at an international partner bank’s ATM kiosk.
Best and Worst Credit Cards for International Travel
Worst: Bank of America, Chase, and Citi all charge 3 percent in foreign transaction fees; American Express charges 2.7 percent; and Discover charges 2 percent, though it isn’t as widely accepted in other countries.
Best: USAA World MasterCard and American Express cards from Fidelity charge only 1 percent for foreign transactions.
Best and Worst ATM Cards for International Travel
Worst: Bank of America charges a $5 withdrawal fee (waived for ATM withdrawals at banks participating in the Global ATM Alliance) plus a 1- to 3-percent international transaction fee; Chase adds on a $3 withdrawal fee for non-Chase withdrawals, plus a 3-percent conversion fee; and Citi assesses a 3-percent withdrawal fee (after conversion to U.S. dollars), plus a $1.50 transaction fee.
Best: Bank of Internet, Charles Schwab, and American Bank don’t charge any fees for ATM withdrawals at foreign banks.
Tips for Using Credit Cards and ATM Cards Outside the U.S.
- When signing up for a lower-fee credit card for international travel, beware of some cards that may make up for lower fees with higher exchange rates.
- Avoid using your credit card for cash advances at ATMs. The interest rate on the advance can be as high as 25 percent.
- Take a backup credit card with you. There’s not a single card that’s accepted everywhere.
- Notify your credit card issuer that you’re traveling abroad. Charges in foreign countries may raise security red flags with your card issuer, and a freeze could be placed on your account.
- Make a list of your banks’ international phone numbers, and take them with you wherever you go.
- Be wary of foreign purchases at home. Card issuers have changed the definition of a foreign transaction to include those made or processed outside the U.S. (even if you make them from your computer at home), and you could see fees for online purchases, for example, if the merchant is in another country.
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